Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Save the Environment and Your Retirement: Sell Tesla - 4th May 16
Silver Bullion Has Key New Player – China Replaces JP Morgan - 4th May 16
Gold Stock Picks Up Over 400%, What's Next ? - 4th May 16
U.S. Treasury Secretary Jack Lew: Puerto Rico Needs Urgent Action - 4th May 16
Technical Trading Mastery for Traders & Investors - 4th May 16
Derivatives Crisis Of Banks…Worldwide - 3rd May 16
Bank of North Dakota Soars Despite Oil Bust: A Blueprint for California? - 3rd May 16
Stock Market Technical Analysis - 3rd May 16
Central Banks Need a Higher Gold Price : Hello GATA - 3rd May 16
A Currency War Battle That Europe and Japan Can’t Afford To Lose - 3rd May 16
When the Truth is Found to be Lies, Confidence in Currency Dies - 2nd May 16
How Brexit Could Help All of Europe - 2nd May 16
US House Prices Outpacing Official Inflation Rate, Household Income - 2nd May 16
USD Still Declining... - 2nd May 16
Gold & Silver Rally Huge as Central Bankers & Analysts Flub - 2nd May 16
Stock Market Bounce Day - 2nd May 16
Stock Market Uncertainty Following Two-Month Long Rally - Will It Continue? - 2nd May 16
Stock Market Correction Underway "Upside Objective Reached" - 2nd May 16
USD, Yen and an ‘Inflation Trade’ Update - 2nd May 16
Gold Commitments of Traders and More - 1st May 16
The Magic of Gold Ratio Charts - 1st May 16
Consensus Forming: China Heading Back Into Financial Crisis - 30th Apr 16
The Next Technical Price Targets for Gold & Silver - 30th Apr 16
Stock Market Downtrend Should be Underway - 30th Apr 16
Gold And Silver – A Clarion Alarm Call For All Paper Assets - 30th Apr 16
US Economic Statistics LIES, LIES AND OMG, MORE LIES - 30th Apr 16
Stock Market Strong Elliott Wave Relationship is Developing - 29th Apr 16
Fed's Kaplan: Brexit to Factor in US June Interest Rate Decision - 29th Apr 16
Silver Miners Strong in Grim Q4 - 29th Apr 16
Is Silver a better bet than Gold in the Near Future? - 29th Apr 16
How to Use the CoT Report in Gold Investing? - 29th Apr 16
Sri Lanka is Intriguing: Areas to Consider for Value Investing - 29th Apr 16
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards - 29th Apr 16
Are We or Are We Not in a New Gold Bull Market? - 29th Apr 16
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

How Will I Know When To Sell My Gold?

Commodities / Gold and Silver 2013 Dec 06, 2012 - 12:59 PM GMT

By: DeviantInvestor

Commodities

NEVER sell your gold because you want to hold it for the rest of your life and pass it on to your grandchildren.

Or

Sell your gold NOW (big mistake – my opinion) if you believe that gold is in a bubble or never should have been bought (as per “gold-bashers” Warren Buffett and Charlie Munger).


Most of us will sell sometime between now and never. What is an objective method to determine when to sell?

Technical ratios at which it might be sensible to sell some of your gold

Sell some gold when the gold to silver ratio drops down to around 15 to 1. The gold to silver ratio is currently about 51 to 1. When gold and silver prices have both risen beyond all typical expectations, the ratio will probably drop to between 10 and 20 to 1. The ratio was about 17 to 1 at the bubble peak in 1980.

Sell some gold when the Dow Jones Industrial Average (DOW) ratio to gold (DOW/Gold) has dropped to near 1 to 1. The ratio is currently about 7.5 to 1. The ratio could reach 1 to 1, for example, if the Dow were priced at 10,000 and gold was selling for $10,000 per ounce. At the peak of the 1980 gold bubble, the ratio was approximately 1 to 1.

Sell some gold when the gold to crude oil ratio rises to perhaps 30 to 1. For example, if crude oil is priced at $300 per barrel and gold is priced at $9,000, that is a 30 to 1 ratio. In 1980 the peak ratio was about 25 to 1.

Sell some gold when you can pay off the entire mortgage on your house with 10 to 20 ounces of gold.

(I suggest you only sell “some” of your gold, not all of it, because it is always a good idea to keep some “real money” and not be utterly dependent upon unbacked paper currency.)

Sentiment-based timing to consider selling gold

Sell some gold when the “money honeys” on financial TV are running one story per hour on the rapidly rising price of gold.

Sell some gold when Time magazine posts a picture of gold bars on their cover with a caption “The new bull market in gold.”

Sell some gold when your hairdresser/barber gushes about the gold she/he just bought and how it is sure to triple in price soon.

Sell some gold when there are lines of people waiting at coin shops to buy gold.

Sell some gold when people finally realize that “money (unbacked paper money) is accepted only because money is accepted,” and people have become reluctant to accept paper money.

Sell some gold when people have realized that money only has value because people have faith in its value, and people have finally lost faith in unbacked paper money.

Additional thoughts: Jim Sinclair suggests that, regarding gold, people should “buy fish lines and sell rhino horns.” Stated another way, when the price has collapsed in a price spike down (looks like a fish line extending downward from a fishing pole) then we should buy. But if the price has risen in a parabolic pattern (looks like a rhino horn), then it is time to sell a portion and wait for the correction. If the price has fallen too for, too fast, and there is no fundamental reason for the price collapse, buy more. If the price has rapidly rallied to new highs far beyond expectations, then it has moved too far, too fast. Those markets rallies, whether in gold, silver, the NASDAQ, crude oil, or real estate, always seem to correct in a crash. Examples include Gold and Silver in early 1980, the Nikkei 225 in 1990, and the NASDAQ in early 2000. It seems likely that gold and silver will go into a parabolic rise within a few years unless the money printing ceases – and we should plan on the money printing continuing for a LONG time.

The common denominators are the human emotions of fear and greed. In simple terms, greed drives the market to new highs and fear causes the crash. People were “getting rich quick” when the NASDAQ rallied from about 1,100 to about 5,000 in less than 2 years – when greed had the upper hand. But when the NASDAQ reached a natural stopping point, fear took over and people sold in panic or to preserve what value remained. If they did not sell and rode the market all the way down, they lost a significant portion of their investment and paper profits. Fear caused people to sell, which created more fear and selling, and the waterfall decline fed upon itself until the sellers were exhausted.

Similarly, in 2008, when gold had collapsed from over $1,000 to under $700 (the price today is about $1,700) in seven months, most amateur investors were reluctant to buy because they were fearful that the price of gold would decline further. Professionals buy the bottoms and sell the tops. Fearful amateurs sell down into the bottoms and then buy back near the tops when greed takes over.

If you bought gold, which is currently in a long-term uptrend, then waiting will eventually bring success, even if you purchased at a temporary top. However, if you were buying Enron Stock some years ago, then waiting only magnified the disastrous investment. Study the fundamentals of your investments until you understand the differences.

When will gold reach $4,000?

The Bottom Line: Buy when the “blood is running in the streets,” and sell when everyone else wants to buy. Use ratios from other markets as objective measures to indicate probable price extremes in markets. We can seldom pick the precise bottoms and tops, but we can carefully observe while others are being swept along by their own fears and greed. If we can keep our heads while others are losing theirs and make sound decisions based on numbers, analysis, and comparison ratios to other markets, we can make intelligent and informed buy and sell decisions. For now, it makes sense to me to hold gold and silver and to carefully evaluate everything else. Massive and supposedly unexpected changes can occur with surprising rapidity. Check here for additional commentary

GE Christenson
aka Deviant Investor

If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2012 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

massxrateoftruth
08 Dec 12, 10:04
Question about technical ratios

Ratio of silver to gold:

In what year does the historical ratio start?

What degree are these ratios relevant?

-Understanding that a percentage of people make decisions reguarding the price in which one buys or sells when squeezing value? Or with day trading swings within applicable ranges? These are the only logical applications to historical ratios I, individually, can think of.

I understand many purposes become associated with the varying personalities buying and selling gold.

Looking at the 'purpose' gold has 'served,' suits my personality the best.

For an individual investor, "Never" seems the most appropriate.

For the one that knows the hours of boredom and moments of terror, ratios seem relevant.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife